Microsoft paying Nokia $1 billion to use WP7? Cheap at twice the price

Microsoft's $1 billion payment to Nokia to get the Finnish giant to switch to …

Bloomberg reported yesterday that Microsoft will end up paying Nokia more than $1 billion to promote and develop Windows Phone 7 handsets, citing two unnamed sources said to be knowledgable of the terms of the agreement. Nokia's commitment to the platform is also long-term: the agreement lasts more than five years, according to the sources. The people also confirmed that the final contract between the two companies still hasn't been signed. For this reason many of the details and specifics are still not public.

Microsoft will be paying some money up-front, and giving Nokia a share of advertising revenue. It will also be paying for its use of Nokia's Navteq mapping services. Offsetting this, Nokia will in turn pay Microsoft for each license it ships.

On the face of it, this sounds like a lot of money. A billion dollars just to stop Nokia plumping for Android, in a deal that isn't even exclusive—Nokia will continue to sell Symbian handsets, and even the MeeGo-powered N950 will ship later this year. Nor is a this deal going to be a quick win for Microsoft, as Nokia's Windows Phone 7 handsets aren't likely to ship in volume—or possibly even at all—until 2012.

In the short term, this deal certainly favors Nokia. The company will still be spending money on Symbian development—the company is expecting to ship 150 million of the handsets in the next couple of years—but will be able to scale back this expenditure, as its operating system development costs are increasingly pushed onto Redmond. This, plus the cash infusion, gives the company instant savings.

But longer term, this deal should prove to be a big win for Microsoft. With each license estimated to cost around $15, recouping the $1 billion will require about 60 million licenses—Nokia handsets—to be sold. And this is a five year deal: it doesn't have to be an overnight success to earn back the money. Unless Nokia implodes and the entire venture is disastrous, that level of sales should be easily achieved.

Strategically, it's even more valuable for Redmond. The Nokia deal gives Microsoft access to a brand with significant market presence around the world (except the US), valuable mapping services, and strong hardware skills. Perhaps even more importantly, the deal has ensured that the biggest smartphone manufacturer in the world has gone with Microsoft's operating system, and not Android.

The sources speaking to Bloomberg said that two features were influential in swinging the deal. As already disclosed when the companies announced the agreement, Nokia felt that Windows Phone 7 offered a greater chance to stand out in the market—something that would be rather harder in the already crowded Android market. But the investment that Microsoft could make was also key, with the implication that Google was unable or unwilling to offer a simliar incentive.

For users of the platform, the length of the deal is also encouraging. Windows Phone 7's future is far from assured. Microsoft's mobile ambitions—for Windows, for tablets, and for ARM processors—are currently something of a mystery. The company brutally killed off the KIN when it was clear that it had failed to meet expectations, and there were concerns that the company would give Windows Phone 7 the same treatment if it failed to take off. But in signing up to a five year deal, it's clear that Microsoft is in this for the long haul, and will stick with the platform to ensure its success.

There are still risks to the deal. The platform could still bomb, Nokia's handsets may all flop, or Nokia may decide that MeeGo has more to offer after all. Microsoft may have made concessions to the Finns that will undermine Windows Phone 7 as a platform. And alienation of the other Windows Phone 7 partners remains a possibility.

How these risks will play out is at the moment anyone's guess: Nokia has said that they don't intend to jeopardize the platform (though they could) and devalue the other Windows Phone 7 manufacturers, so they're saying the right things—we now have to wait to see if they follow through.

A billion dollars sounds like a lot. But to solidify Windows Phone 7's position for just a billion dollars—a billion dollars that should be earned back over the life of the deal—and to prevent Nokia from going with Android, it's an absolute bargain.

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147 Reader Comments

A billion dollars sounds like a lot. But to solidify Windows Phone 7's position for just a billion dollars—a billion dollars that should be earned back over the life of the deal—and to prevent Nokia from going with Android, it's an absolute bargain.

Nokia wasn't going to Android, and it wouldn't really matter if they did - if a consumer wants android, they can get one from HTC, Samsung, Moto, SE, LG, and a few others. There isn't a shortage, and if Nokia isn't making what people want, there are other sources. Hell, they can even go elsewhere for WP7 phones.

The one thing that's going to come out of this is some WP7 phones with nice cameras that aren't going to sell very well, especially if Nokia thinks they can still get away with their premium pricing.

Think about it this way - Microsoft have effectively bought Nokia for $1B.

Now it seems very cheap.

More like for $0 since they get the licensing revenue. What I can't believe is that Nokia sold it's soul for so little. If there's anything history has shown it's that MS won't hesitate for second to screw over their "partners".

and Android surely has made updates easy and freely available for all.

Actually, I think they did. Its the phone manufacturers and service providers where the bottleneck is occurring. I've had 2.2 on my Vibrant for months and multiple updates to the GPS/cell radio/file system/etc. thanks to source code being in the hacker/development community's hands.

"The company will still be spending money on Symbian development—the company is expecting to ship 150 million of the handsets in the next couple of years—but will be able to scale back this expenditure, as its operating system development costs are increasingly pushed onto Redmond."

Keilaniemi, Start your copiers!!!

The kicker would be if Nokia pulls a Microsoft, and copies the best parts of Windows Phone 7, and puts them into Symbian. How could Microsoft object, after setting the precedent with Apple, Sybase, and others.

ARS even published an article recently about how much the smartphone and tablet market has to expand, but I think that was overblown.

When Wimdows phone launched - I said the market was saturated already, and these events prove I was right. Anyone who thinks there is room in the smart phone market needs to take an economics 101 class.

My wife bought WP7. Probably because android was too complicated and dull and she hates the ditzy women that are the stereotypical iPhone owners.

Hmmm. I'm sure there are plenty of women iPhone owners who are engineers, doctors, professors, you name it. And some ditzes too. But I think your wife was more concerned about something that doesn't actually exist in any real sense, as iPhone owners tend to fall across many strata of society. I don't think there is a typical female iPhone owner, and if one were to look at what such a person is like, I kind of doubt she'd be a ditz.

What other handset maker is going to stick with WP7 after this slice of favoritism?

If I was Samsung, et al, and sales of WP7 phones were rather lackluster, I'd be going to Microsoft and suggesting that I'm dropping all support of WP7 unless I get a sweetheart deal like Nokia. If Nokia probably won't get any WP7 phones out until sometime in 2012, how desperate would that make Microsoft to not lose their existing manufacturers in the meantime? Plus, they've already shown themselves more than willing to toss out money to get someone on the platform.

How does WP7 allow Nokia to stand out, other than the fact that the platform is not a hit with consumers?

Because MS gave Nokia the right to modify the OS to their requirements - and because Nokia actually may make a high-end WP7 phone that is good *and* competitive? That could certainly stand out, IMHO.

1) Elop said Nokia is unlikely to modify WP7. Besides, they are firing a ton of people, and the best devs are going to jump ship as soon as they can. I bet Apple, Motorola, HTC, Samsung, Google, etc. are prioritizing all mail from Finland right now.2) If they are modifying anyways, then, again, what advantage does this give them vis-a-vis Android, which they could modify to their heart's content?

Even if Microsoft gave nothing Nokia would be insane to switch to Android. You always want to stand out in the CE market as that is how you get margin. Just look at Apple vs Dell, Lenovo, HP etc. their margin kills the rest because they stand out.

How does WP7 allow Nokia to stand out, other than the fact that the platform is not a hit with consumers?

Personally, I think there would be a lot to be gained by Microsoft sticking to Nokia only.

I actually agree with this. I see a lot of benefits to MS in this. If MS made WP7 exclusively available to Nokia, I think it would be a slam dunk mutual relationship.

However, what I cannot see is how the current situation is good for Nokia. Don't get me wrong. I think this is fantastic for WP7. I have always had a soft spot for Nokia though, and so am looking at it strongly from Nokia's side, and I see no benefit that Android would not provide (minus temporary cash payouts).

I don't think there is a typical female iPhone owner, and if one were to look at what such a person is like, I kind of doubt she'd be a ditz.

I was noticing today that of the 4 female VPs and executives in the meeting I was in today, 3 of them had iPhones and one had an Android. All the male VPs had iPhones. We did nearly 2 billion in sales last year, a 10% increase, so I don't think that anyone in the leadership team can be classified as ditzes.

Now someone who bases their phone purchasing decision on what they perceive to be the stereotype of the average phone user, rather than the actual features of the phone, that's seriously pretty close to the definition of a "ditz".

The thing is though, it kind of works. God knows how much money Microsoft has sunk into the Xbox franchise, Kinect alone supposedly had a half billion dollar marketing budget, but they're winning in sales, Kinect beat sales estimates and now the 360 generally outsells the PS3 and Wii (although not according to the latest weekly figures on VGChartz, but that's thanks to Killzone 3).

For all the praise MS is getting for kicking ass in the console department, people just seem to ignore the fact that Nintendo absolutely crushed them. Even the PS3 isn't very far behind in global sales. The only reason the Wii is occasionally being outsold by the XBox is saturation. It has just sold so much more, that there are so many fewer people who are looking to buy one.

Think about it this way - Microsoft have effectively bought Nokia for $1B.

Now it seems very cheap.

More like for $0 since they get the licensing revenue. What I can't believe is that Nokia sold it's soul for so little. If there's anything history has shown it's that MS won't hesitate for second to screw over their "partners".

not from what it sounds. It sounds more like Microsoft spent 1 billion dollars to buy the rights to potential future profits.

The problem is will they sell enough licenses sell to offset the first billion dollars and on top of breaking even, will the investment return a greater rate of return than lets say sticking that billions dollars in a 10 year treasury note yielding 3.54% ?

A quick rough math, would indicate Microsoft would need to sell 9.44 million licenses each year for 10 years to meet at least a 3.54% return on that investment. which sucks since why not just stick it in a T-note without risking the 1 billion dollars in capital.

They need to sell over 18 million licenses annually if they want to at least get close to 7.08% annual return on that 1 billion dollars over 10 years.

This would mean 188.8 Million licenses sold to nokia in 10 years. (Assuming Microsoft gets a net 15 dollars per license)And I am not including in the math how much money did it cost Microsoft to develop WMP7 that cost should be factored in as well. (Anyone know?)

It took Apple 4 years to sell 100 Million iphones. From what I read, Apple spent 150 million in developing the iphone (code and resource reuse helps and having a leaner more efficient company and management)

I wonder what the rate of return will be on that 1 billion dollars for microsoft compared to a 10 year T-note.

I'm not an economist but...

You probably can't spend a billion dollars on treasury notes all at once, without changing the price of treasury notes. In any case, what are treasury notes based on? Where do they get their value from? That's right—companies like Microsoft. So if you have the intelligence to figure out which stocks and shares are going to increase in the LONG term, and HOLD them; you'll easily beat a long-term T-note.

An example of the kind of strategic thinking I'm referring to:http://www.slyman.org/blog/2011/02/arm- ... hitecture/A few weeks ago, ARM shares were high (50% up on January's figures) and ARM directors were selling. It was just the knee-jerk market reaction after MS announced plans to support ARM's processors with Windows 8. In the long term, ARM is expected to continue doing well, for the reasons I explain.

So go and find some area of industry that you probably understand better than a wall street trader, and start investing in that. If you don't understand any industry well enough, study one by reading the literature. This is much better than a dumb approach that basically says, "I don't know what I'm doing so I'll retreat to gold and bonds..."

The problem is will they sell enough licenses sell to offset the first billion dollars and on top of breaking even, will the investment return a greater rate of return than lets say sticking that billions dollars in a 10 year treasury note yielding 3.54% ?

The difference is that the upside is much greater on this investment than the treasury notes. If the investment helps establish WP7 as the primary (or even amongst the top 2) mobile platform, MS will be milking far more money for a very long time.

The problem is will they sell enough licenses sell to offset the first billion dollars and on top of breaking even, will the investment return a greater rate of return than lets say sticking that billions dollars in a 10 year treasury note yielding 3.54% ?

The difference is that the upside is much greater on this investment than the treasury notes. If the investment helps establish WP7 as the primary (or even amongst the top 2) mobile platform, MS will be milking far more money for a very long time.

It better be. They néed to sell a bit over 188 million licenses over 10 years to nokia.

The problem is will they sell enough licenses sell to offset the first billion dollars and on top of breaking even, will the investment return a greater rate of return than lets say sticking that billions dollars in a 10 year treasury note yielding 3.54% ?

The difference is that the upside is much greater on this investment than the treasury notes. If the investment helps establish WP7 as the primary (or even amongst the top 2) mobile platform, MS will be milking far more money for a very long time.

It better be. They néed to sell a bit over 188 million licenses over 10 years to nokia.

That shouldn't be hard at all. Last year, nearly 300 mn smartphones were sold worldwide. Even if MS corners 20% of the market, they will eclipse 200 mn in less than half a decade IMO, since the smartphone market is growing ridiculously fast, and will continue to do so for a while.

Even if MS corners 20% of the market, they will eclipse 200 mn in less than half a decade

That's well and good, but new figures that just came out put MS market share going from 11.8% to 9.7% in the three month period of October through January, which included the launch of WP7. It's not difficult at all to see a three way race between Android, Apple, and RIM, with Microsoft not even cracking 10% market share. And that's ALL carriers. If that 10% gets divided up between 5 manufacturers, Nokia could be looking at low single digit numbers in terms of worldwide market share of their WP7 phones.

I think its pretty evident that the people who are vocally complaining aren't the actual users of Nokia phones or WP7. As a wp7 userwho used to use nokia I welcome this move. The people bashing MS and Nokia fall under the two groups below1. Android users who are unhappy that Nokia didn't go with android and thus cementing its place as the dominant platform, and2. Apple fanboys who are furious that their early predictions of WP7 being DOA won't come true. And if cousre they will hate on anything MS.

I know this move from Nokia comes as a big shock to all Android-Open-Source disciples. But IMHO it IS the best move for both companies. Microsoft gets the (still) 900lb gorilla in the cell phone market, and Nokia gets a decent OS for their smartphones. If I was a WP7 (edit: and Android) manufacturer, I would be worried by now.

Nokia can concentrate on building good, solid phones (Nokia's core competency) and Microsoft can concentrate on delivering a good, solid OS (MS' core competency) for these phones. Looks like a win-win to me.

digger1985 wrote:

2. Apple fanboys who are furious that their early predictions of WP7 being DOA won't come true. And if cousre they will hate on anything MS.

I consider myself an Apple customer and I think this is a good move. I actually think that Microsoft should bet its hedges on Nokia and have them be the sole provider of WP7 phones. One company, one experience. Just like with Apple and the iPhone. The iPhone is successful for a reason.

1. Find the market leader in decline2. Place your man as their CEO and give them a billion $3. ????4. Profit!!

It might very well be a success, considering that MS and Nokia are both VERY commited to make WP7 win. Once Nokia starts shipping WP7 in Europe and Asia, this september, iPhone and Android (not so much) will have a tough competition.

For me, one of the biggest problem for WP is in-store presentation. They are lumped together with with Android and even WM6 phones with basically the same hardware from the same manufacturers. As such, they don't stand out that much on first sight and are essentially lost in the sheer volume of other phones.This issue is even more important in stores where they stick to completely ridiculous yet still prevailing policy of not presenting real phones but only the bricks with home screen snapshot slapped on them, minimizing the chance to differentiate from the horde and showcasing your strength.If Nokia can build an Apple-class design hardware and offer WP its brand to become easily distinguishable and recognizable, this deal could do wonders for WP adoption.

I think its pretty evident that the people who are vocally complaining aren't the actual users of Nokia phones or WP7. As a wp7 userwho used to use nokia I welcome this move. The people bashing MS and Nokia fall under the two groups below1. Android users who are unhappy that Nokia didn't go with android and thus cementing its place as the dominant platform, and2. Apple fanboys who are furious that their early predictions of WP7 being DOA won't come true. And if cousre they will hate on anything MS.

3. People who had an interest in MeeGo and really wanted to see where Nokia could take it.

I'm in that group btw. I'm currently using an Android phone because there aren't any other viable alternatives (for me, I can understand that people prefer WP7/iOS, but they're not viable options for me) and I've been looking forward to seeing what Nokia could do with MeeGo. I'm still interested in MeeGo's future and I really hope that the rest of the MeeGo community (it's not just Intel and Nokia anymore) takes it forward and even continues work on the smartphone interface.

For me, Nokia going with WP7 sucks; I've always liked Nokia and I was interested in MeeGo, but I have no interest whatsoever in WP7.

This deal makes a little more sense from Nokia's perspective now. I am not sure if the $1 (€ 0.72) Bn offsets Nokia selling Android handsets, a platform which is already relatively mature over the next 1 year or so, but at least it doesn't feel like Nokia sold itself for cheap.

That being said, Android would have been a great investment for Nokia, because they could have also used it to power their low end phones, which they still do (and will continue to) sell a majority of in the world, spreading out the costs of Android dev even further.

I don't buy the "differentiate themselves in the market" argument. That is a euphemism for "the platform is not successful". And its a complete catch 22 in a 2-3 year timeline. If the platform allows them to continue "differentiating in the market" that means that the platform failed. If it is successful, then HTC, Samsung, LG, etc. will jump onto the WP7 bandwagon, and all that "differentiation" is lost. Go with Android, and they actually could differentiate themselves, just like HTC does with Sense, and Motorola with Blur.

I agree with the basic idea that Android would be a much better choice for Nokia, being an OS that will gain massive traction and would probably fir in better with their existing software development skills-base. Their efforts in Linux-based phone OS's certainly positioned them well to take on Android development to produce in house apps and features.

Having said that, I think that the concept of differentiating yourself via software customizations e.g. Touchwiz, sense and blur, is a totally failed idea. Firstly, you commit large development and maintenance resources to the custom interface, secondly, you substantially complicate and impede your upgrade cycle: users of these handsets frequently wait a year to get available Android updates - see how many are running 1.6 (and this leads to problems like the recent malware outbreak that infected thousand of handsets running outdated software versions due to vendors and operators failing to roll out upgrades them)

Finally it takes a special kind of arrogance for a phone manufacturer or an operator to think they have what it takes to customize a handset in any way that customers find valuable. Never mind apple and M$, who are primarily software companies, the phone manufacturers are pathetic at creating a user experience in software (Nokia used to be the unique exception a long time ago, before complexity outpaced them). Phone manufacturer's best bet is to differentiate themselves in hardware (as long as the software platform is decent which both WP7 and Stock Android 2.3+ are). And moreover, hardware is something Nokia can excel at and certainly strongly differentiate themselves with.

arcadium wrote:

The play is simple here. Nokia's American investors wanted returns. Layoff all the SW devs, possibly see a bump in smartphone sales over the next 2-3 years (when they are still "differentiated" in the market) and then cash out, as the market rises due to high quarterly profits. In the long run, Nokia is screwed. The frontloading of the cash from MS to Nokia is a clear sign of that (it will help mask the cost of SW for a year or 2, making it seem like Nokia's costs have gone down dramatically, and giving Elop a nice incentive bonus).

For MS, this is a brilliant move. An awesome way to give WP7 some desperately needed momentum.

And this is the most insightful part - I completely agree, this is the most likely driver behind this change of direction. In terms of long term development it destroys value, since signficant amounts were invested in developing software expertise that will now be essentially "written off". What's more, Nokia has mortgaged it's future strategy to Redmond's whims and execution quality (which have been spotty in the past).

Android would have allowed them to leverage their existing strengths and have more control over the platform - should google flake out (unlikely) they could have even released their own Android version based on the base source code, using their OS development skills. I wonder if they even negotated with Google to see what kind of deal they could have gotten there - but then its likely they don't even "get" Google and its culture.

This was a short term play (cost/sales/new direction) for them at best, and any success will be practically accidental. M$ as you correctly point out, is the winner here.

Reminds me of the scene from "Funny Farm" where Chevy Chase says, "If I can't make any friends, I'll goddamn buy one!"

The thing is though, it kind of works. God knows how much money Microsoft has sunk into the Xbox franchise, Kinect alone supposedly had a half billion dollar marketing budget, but they're winning in sales, Kinect beat sales estimates and now the 360 generally outsells the PS3 and Wii (although not according to the latest weekly figures on VGChartz, but that's thanks to Killzone 3).

They did it via brute force and didn't really bury the competition, but it got them up there to be a serious competitor.

and Android surely has made updates easy and freely available for all.

Actually, I think they did. Its the phone manufacturers and service providers where the bottleneck is occurring. I've had 2.2 on my Vibrant for months and multiple updates to the GPS/cell radio/file system/etc. thanks to source code being in the hacker/development community's hands.

"Android" hasn't made updates freely available. That's only the case if you own a phone made by Google or have rooted your phone (provided someone's gone to the trouble of porting the latest Android version to your phone model). For the rest of us, you have to wait for the phone maker and/or cell carrier to OK the update, which may or may not occur.

I actually think there's a parallel between this and the WP7 Samsung update fiasco. It may well have been something Samsung did that botched the update process, but in the end it's Microsoft who took on the responsibility for updating the OS, so they can't just blame Samsung. It's their problem too. With Android it's the same thing. Right now, usually only the more tech-savvy complain that they're not getting 2.3 (or in some cases 2.2), but there's a risk that public perception of Android devices will be one of permanently outdated devices.

Leather Rope wrote:

Nokia has lost its way. From phone superiority to being an also-ran. And MSFT just got into bed with a company on the decline. A billion wasted.

They've lost it some time ago. Nokia is great for dumbphones, but my experience as an E72 user says that their Symbian OS is lagging *far* behind even RIM's offers. Blackberries may seem unpolished compared to Android, iOS or WP7, but they do their job very effectively. I honestly don't know how much potential MeeGo has to compete in the smartphone market, but apparently Nokia wasn't very sure either.

The biggest problem for both MS and Nokia is the lack (at the moment) of a Windows Phone 7 ecosystem. It's not enough to have a nice phone OS - if it isn’t seen to expand into tablets, portable media players, etc., then it doesn't look like a good long-term bet.

Given that Microsoft is still apparently committed to using a form of Windows on any tablets, Nokia looks effectively pigeonholed into being a phone-only company. Admittedly, that's still a pretty big pigeonhole - but it still looks limiting compared to the ability that all the other phone manufacturers have to move into tablets and other devices.

Unless Nokia implodes and the entire venture is disastrous, that level of sales should be easily achieved

Based on what analysis? Sales of up-market Symbian handsets? WP7 handsets? Both of those carry a premium, especially WP7 and unless Nokia comes up with a decent mid-range WP7 smartphone we cannot make statements like that. Why? Because MS has its own costs factored into that $15 licence that haven't been accounted on the calculation above. We can base them on the sales of WP7 handsets so far, but the only real stronghold for WP7 seems to be the US, as here in the UK just about every other phone shop salesman peddles Android to people who want anything but iPhone.

In short, it would be nice to see the analysis based on the current market numbers - something that Tomi Ahonen does, for example.

I have a nokia, have always had a nokia - for my business phone. The company hands them out and every so often we get an upgrade to a new Nokia phone. And no-one really complains becuase they're always the same, sometimes with a few new features and cleaner keys

However, that was then. Now, if the company offered a new nokia running WP7.. well, they wouldn't. Suddenly the 'safe, easy option' of just geting the next Nokia upgrade disappears and you have to go with a new, unknown OS. (One that's totally not geared towards business users). The company will evaluate the phones, and evaluate others too and we'd end up with an Android one probably.

That is a huge problem - MS did not buy Nokia's massive marketshare, that market share is a Symbian one. WP7 will not supplant that at all.

Now, Nokia did have a choice with Android, they could have taken the OS and made additions suitable for business users - like they were doing with the E series for example. That would have really differentated them in the Android ecosystem quite happily. They could have carved a niche for themselves. They could do this with WP7 but they've already said they won't go about fiddling with the software in case it upset's MSs other WP7 manufacturers.

The article seems to suggest that it will be trivially easy for MS to earn back their $1 billion, but I don't think it's so obvious that they'll be able to sell 60 million of these. While I think this deal is good for both companies, we have to be realistic here -- these are two extremely desperate companies that have been stumbling badly since the iPhone was released. It's been over four years since the iPhone was first announced and it sounds like it will take another year before these two firms *might* finally have a coherent answer to the iPhone.

I used to think that WP7 would end up being the strongest competitor for the iPhone, but the repeated execution errors from MS is now leading me to think that MS is a more deeply dysfunctional company than I realized.

Yes, but Xbox is still loss-making when seen over its lifetime investment costs by M$, i.e. it still has not paid back as much as M$ has put into the platform since its inception...

They make a profit now, and they can make a profit going forward, that's all that matters. They made a decision over a decade ago that the opportunity cost of not being in the console business was greater than keeping the money, and on the whole, it was a good decision. They made some bad decisions along the way, of course, but now that's sunk costs. They make money hand over fist now, and are a legitimate player. They're making the same bet on WP7 and Nokia.

Unless Nokia implodes and the entire venture is disastrous, that level of sales should be easily achieved

Based on what analysis? Sales of up-market Symbian handsets? WP7 handsets? Both of those carry a premium, especially WP7 and unless Nokia comes up with a decent mid-range WP7 smartphone we cannot make statements like that. Why? Because MS has its own costs factored into that $15 licence that haven't been accounted on the calculation above. We can base them on the sales of WP7 handsets so far, but the only real stronghold for WP7 seems to be the US, as here in the UK just about every other phone shop salesman peddles Android to people who want anything but iPhone.

In short, it would be nice to see the analysis based on the current market numbers - something that Tomi Ahonen does, for example.

As usual, Peter takes information and numbers and applies the "Bright Twist" to them to better make his point. Estimates for license fees to MS over the past several months have stated $8-12 per phone, with a consensus that $8 for most of them, with a sliding scale up to $12 for the most expensive devices.

Now, one writer has stated that MS may get "up to $15" per license. Peter naturally changes this to "$15 per license". Nowhere have I read that before. In fact, the $15 is a new number, and is so far off from the previous numbers the financial sites have been giving, that I wonder where it came from. Below is the link to the article with that number. People will notice how it's worded.

Assuming that $15 is just for the most expensive models, or as is more likely, wrong, it will take many more license sales for MS to make a profit on WP 7 than people are getting from using this number. It may be impossible, considering what it has cost MS to develop this, and the $500 million they said they were spending for the opening campaign. R&D costs will continue, as will MS's requirements for marketing and support. That doesn't come for free as some here seem to think in their number work-ups in their posts.

Then, of course, there is the $1 billion that is expected they will be paying Nokia. I wonder if that number is real though, as MS has made deals like this before, with smaller numbers, and has yet to pay anything to those companies.

Then there is the Symbian problem. How are people going to look at buying a Symbian phone now that Nokia said that they will be discontinued? What will they have to look forwards to in the future with these phones? Developers will be leaving in large numbers. That's to be expected. The ecosystem, which was never great to begin with, will start to deteriorate. Nokia sold 36% more Symbian phones last quarter than they did the quarter the year before. That's half the rate of smartphone growth. But at least it was good growth on it's own. I would imagine that sales will not continue to grow as soon as most of their customers, or potential customers understand what is happening. It will likely begin to shrink.

With WP7 mostly known in the USA, where it's doing badly, how is it going to do in the EU, where most Nokia smartphones are sold? Win Mobile has never done that well there, as it was mostly a US and Canadian thing. Will all of these tens of millions of Symbian owners move to Nokia WP7 phones because of some loyalty to Nokia, or will most abandon them for Apple and Android products? I think the latter. No doubt, Nokia will sell tens of millions of WP 7 phones, but the problem is that WP7 is supposed to save them from becoming an also ran, with shrinking marketshare. How is that going to happen? They would have to sell 150 million smartphones next year, most of them WP7 models, and that's highly doubtful.

What will Nokia's board do when they realize that this is killing Nokia's smartphone sales rather than increasing it? 5 year deal or not, they may shift away from it to Android, and possibly back to Symbian and MeeGo.

Long term, I don't see this as working out as Nokia hopes. MS though, will be happy to get any increase in sales they can, and even 10 million a year would triple the license sales they seem to be getting now. Still a major loss for them, but it would allow them to come up with some public image of it doing well, even if it kills Nokia's business model.

I don't think there is a typical female iPhone owner, and if one were to look at what such a person is like, I kind of doubt she'd be a ditz.

I was noticing today that of the 4 female VPs and executives in the meeting I was in today, 3 of them had iPhones and one had an Android. All the male VPs had iPhones. We did nearly 2 billion in sales last year, a 10% increase, so I don't think that anyone in the leadership team can be classified as ditzes.

Now someone who bases their phone purchasing decision on what they perceive to be the stereotype of the average phone user, rather than the actual features of the phone, that's seriously pretty close to the definition of a "ditz".

To add to this, most of the top brass where I work (female and male) are using iphone/ipads and I hardly that they are ditzes as they are all Harvard/Princeton/Columbia alumni. Maybe that guys wife is projecting.